The Leaseback Scam – Australia’s Enron

In August 2003, scandal visited City Hall. A now defunct company named Allco Finance (which stands for Australian Land Lease Corporation — with ties to Belgium and the Caymans) tried to purchase tax ownership of your $255 million Sewer Treatment plant. After a lengthy struggle, the proposal was defeated, but it would have been one of the costliest mistakes in city history had it passed.

It would feed a fire for three hours.

It was scandalous. It was fraudulent. It was 21st Century Snake Oil. It involved two entities in the Cayman Islands, and a bank in Belgium. It was blasted by the Chairman and Vice Chairman of the U.S. Senate Finance Committee.

There were several different council meetings regarding this disastrous contract. [See official minutes: 8/26/2003 (p.7), 10/01/2003 (p.8) & 10/06/2003 (p.37)]. In addition, the public was shut out of the discussion by voting to go behind closed doors to discuss the contract. [See official minutes: 9/15/2003 (p.4) and video (about 1 hour and 2 minutes into the meeting].

Here is the letter initially sent to the Mayor’s office on 8/5/2003. Read the minutes from the initial presention on 8/20/2003.

Check out the minutes and video for the 8/26/2003 Special Council meeting. The majority of the council was ready to approve it sight unseen. I offered an amendment which required the contract be released to the council and the community. My amendment forced this disastrous contract into the sunlight, and it all went downhill from there.

On 9/15/2003, Alderman Ray Hadley and I asked for an explanation of the Cayman Islands clauses. The Council decided to go behind closed doors to discuss the issue.See minutes (p.4) and video (about 1 hr; 5 minutes into the meeting). After the executive session, the council voted unanimously to defeat it.

U.S. Senate Finance Committee hearing on 10/21/2003
Some of the opponents of the Leaseback testified from behind privacy screens with voice distorters and armed guards. That’s how serious this was. U.S. Senator Grassley from Iowa and Senator Baucus from Montana are from opposite political parties, and they joined together to blast these transactions. U.S. Senator Grassley called it “good, old-fashioned tax fraud”.

Leaseback Defeated (11/17/2003)
Attached are the minutes and video from the meeting where the Leaseback was finally defeated. It was a great debate and the stakes were high. Even after the congressional hearings had exposed this transaction as a scam, there was still resistance to defeating the proposal. Retired Circuit Judge Roland Grosshans said he believed that a “pervert” wrote the contract, and that it didn’t make sense to do this for the Belgians since they still hadn’t said thank you for liberation in during WWII. (The veterans in the audience cheered).